Money

How to remove VAT from a price (divide by 1.2)

By Matt Chapman/Published 4 November 2026/5 min read

You’ve got a price that already includes VAT (a receipt, a quote, a supplier’s “inc VAT” price list) and you need the figure before VAT, or just the VAT part. The obvious move is to take 20% off. It’s also wrong, and the mistake grows with the price.

This guide gives the quick answer, explains why it works, and walks through receipts with mixed VAT rates, spreadsheets and pennies that don’t add up, with a check at each step so you know the answer is right.

This guide explains the arithmetic only. It isn’t tax or financial advice. For which VAT rate applies to what you buy or sell, or whether you can reclaim VAT, check GOV.UK or ask an accountant.

The quick answer

To remove VAT from a price that includes it, divide by 1 plus the VAT rate:

So a £1,500 quote including VAT at 20% is £1,500 ÷ 1.2 = £1,250 before VAT, and the VAT is £1,500 ÷ 6 = £250. The two add back up to £1,500.

If you just want the answer, the VAT calculator does this to the penny: choose Remove VAT, enter the price and pick the rate.

Why taking 20% off is wrong

VAT is worked out on the price before VAT, the net price. A seller takes the net price and adds 20% of it:

Net price   £1,250
VAT at 20%    £250   (20% of £1,250)
Gross price £1,500

Working backwards, the £250 of VAT is 20% of £1,250, not 20% of £1,500. Taking 20% off the gross price gives £1,500 − £300 = £1,200, which is £50 too low. You’ve removed VAT on the VAT.

That’s also where the “divide by 6” shortcut comes from. If the net price is 100 parts, the VAT is 20 parts and the gross is 120 parts. The VAT is 20 out of 120, which is one sixth of the gross. At 5% it’s 5 out of 105, one twenty-first. HMRC calls this the VAT fraction and uses it in its own guidance (VAT Notice 700): the rate divided by 100 plus the rate.

Step by step, with examples

Example 1: a receipt at 20%

A tool from a DIY shop costs £49.99 including VAT.

1. Net price: £49.99 ÷ 1.2 = £41.658…, which rounds to £41.66.
2. VAT: £49.99 − £41.66 = £8.33.
3. Check with the VAT fraction: £49.99 ÷ 6 = £8.33. It matches.

Taking 20% off would have said the VAT was £10.00, overstating it by £1.67.

Example 2: a bill at 5%

Domestic gas and electricity are charged at the reduced rate. A bill of £63.00 including VAT at 5%:

1. Net: £63.00 ÷ 1.05 = £60.00.
2. VAT: £63.00 − £60.00 = £3.00.
3. Check: £63.00 ÷ 21 = £3.00.

Example 3: a receipt with mixed rates

A supermarket receipt for £30.00 might include £12.00 of zero-rated food and £18.00 of standard-rated items such as cleaning products. You can’t divide the whole £30 by 1.2, because the food has no VAT in it. Work each rate separately:

Most till receipts from VAT-registered shops mark each line with a code (often A, B or a star) and print a VAT summary at the bottom, split by rate. Use that summary rather than guessing which items are which.

Doing it in a spreadsheet

With gross prices in column A, starting at A2, these formulas work in Excel, Google Sheets and LibreOffice:

B2 (net):  =ROUND(A2/1.2,2)
C2 (VAT):  =A2-B2

Rounding the net figure and then subtracting it means the net and VAT always add back up to the exact gross price. If the rate varies by row, put it in column D as a percentage (20%, 5% or 0%) and use =ROUND(A2/(1+D2),2) for the net.

To check a whole sheet, add a column with =B2+C2-A2. Every row should show 0.

Why pennies sometimes don’t match

Your answer may be a penny away from the figure on an invoice. That’s rounding, not a mistake. A business can work out VAT on each line of an invoice and add the lines up, or work it out once on the invoice total, and the two methods can differ by a penny or two. HMRC allows both, with detailed rules for each in VAT Notice 700; the key requirement is that a business is consistent.

If you’re reclaiming VAT on a purchase, use the VAT figure printed on the supplier’s VAT invoice, not your own calculation. Your calculation is for checking it and for pricing, budgeting and comparing quotes.

Adding VAT the other way round

Going forwards is simpler: multiply the net price by 1.2 for 20%, or 1.05 for 5%. £250 plus VAT at 20% is £250 × 1.2 = £300.

The common mix-up is the reverse of the one above: someone quotes “£300 including VAT”, a customer asks for the price without VAT, and they’re told £240 (20% off) when the right answer is £250. When you quote, say clearly whether a price is “plus VAT” or “including VAT”. Prices shown to consumers generally have to include VAT.

Checks that prove you’re right

• Add it back up. Net plus VAT should equal the gross price exactly.
• Multiply forwards. Net × 1.2 should give the gross price, give or take a penny.
• Use the fraction. At 20%, the VAT should be very close to one sixth of the gross price. If your VAT is one fifth, you’ve taken 20% off.
• Check the rate. The standard rate is 20%, the reduced rate 5% and the zero rate 0%, with some things exempt from VAT altogether. GOV.UK’s VAT rates page lists what falls where.

Quick checklist

• Divide by 1.2 (or 1.05 at 5%) to get the price before VAT
• The VAT in a price at 20% is one sixth of it, not 20%
• Split mixed receipts by rate, using the till’s VAT summary
• In a spreadsheet, round the net figure and subtract it from the gross
• A penny’s difference from an invoice is usually rounding
• For reclaiming VAT, use the figure on the VAT invoice

Estimates for illustration only and not financial or tax advice.